Farming has always been a part of culture and tradition in rural India and never was treated as an industry. As long as the farming continued to be a tradition there was no need of a loan. But when farming was seen as economically viable activity, more as an industry, the need arose for more funds. To get higher production, on the same piece of land, more investment in agriculture was made with an assumption that agriculture will be a profitable enterprise and farmer will gain significantly.
In agriculture, both welfare and profit persisted together. Agriculture was taken as provider of food for the household and grains for merchants for their business. In the social set up businessman (Agricultural merchant) was considered to be the mediator between the farmer the producer, and society the consumer, or binding link between the market and people. In the past social values rather than purely the market principal of maximizing profit guided the businessman.
Agriculture has now become market oriented. It neither meets the household food requirement nor very profitable to the farmer. Ever since agricultural commercialisation has taken place the indebtedness of farmer has increased. Market based agriculture is mostly being supported by commercial credit /loans. Land as the security against loans keeps farmer as a bankable / viable client for fresh loan. Contrary to that a businessman can be bankrupt, he pockets the public money and pretend to be insolvent. A chance of farmer cheating or not repaying the loans is not a normal phenomenon. While businessman can put all his assets on stake to earn profit which farmer cannot. Consequently farmer began to take loan from traditional moneylender. As moneylender became exploitative the state came in support of farmer by providing Agricultural Credit through banks and others public institutions. Banks kept land as security against the lending and increased agricultural credit to boost the agricultural production in the country.
Today farming has become worst than business. As loans have not just turned farmers insolvent but have driven them to committing suicide. The system has been engineered to make the farmer indebted. Private and public financial institutions have come forward to provide loans under the general supervision of NABARD. The system of lending and the rate of interest charged are discriminatory against farmers. Indebtedness has become the fate of farmers'.
